Online advertising has always been complex (sometimes obfuscatory) but retail media has shown FMCG brands that the devil is truly in the detail.

Advertisers are getting to grips with new ways of understanding their target audience, new competitor dynamics, new ways of working, and new types of creative.

Part of its appeal is the fact that, in its on-site form, such as sponsored product ads, retail media appears excitingly simple. “My belief is that [retail media] is not really totally media. Some of it is media and a lot of it is merchandising,” says David Pollet, CEO at Incremental, a retail media measurement platform. Note, however, that Pollet was talking to Econsultancy about the inadequacy of legacy approaches to measurement. Understanding incremental sales uplift from retail media is much trickier.

Retail media has expanded off-site and into the ‘upper funnel’, too, making it harder to define. Advertisers can target shoppers deterministically on the open web, watching CTV, or on social media – and some brands are now trying to follow their customers’ footprints all the way to checkout. This mix of media requires FMCGs to pat their heads and rub their tummies at the same time – a combination of ecommerce skillsets with brand, shopper and performance marketing.

“Retail media is retail plus media,” says Katrina Smart, European Commerce Media Director at Mars United Commerce, with a degree of understatement. So, if retail media requires synthesis, how are advertiser organisations adapting?

In this article, we’ll look at how:

  • brands are restructuring for retail media;
  • retail media demands changes to the planning cycle;
  • for CTV and off-site activation, brands and agencies require a mindset shift to understand the role of deterministic data;
  • new approaches to measurement can avoid the ‘ROAS trap’;
  • advertisers need an appetite for ‘test and learn’.

Brands are restructuring for retail media

Brand manufacturers have been grappling with the impact of rising online sales in recent times – a 2023 survey by Profitero revealed that 63% of those surveyed reported 1-2 reorgs related to ecommerce in the past two years. For FMCGs, the context for this is illustrated by eMarketer’s forecast that grocery will be the largest ecommerce category in the US by 2026, by penetration of online sales.

Retail media is one part of this ecommerce shift (alongside b2b marketplaces and selling direct to consumers), and it has been well documented that FMCG brands have been working to break down budget and workflow silos to get the most from this type of ad targeting.

Marketing Week has reported on efforts by PepsiCo to bring retail media to the forefront of a complex marketing organisation, aligning brand and shopper teams. Senior director of ecommerce marketing in Europe, John Ridgway, told the publication that, “We’ve made a lot of effort to really tie all of these things together and make sure we’re having an impact.”

Ridgway also discussed appointing retail media “champions” within marketing teams and “embedding” retail media earlier in the planning cycle for “new product launches, big selling moments… or even our promotion strategy”.

Nevertheless, at some FMCGs, brand teams and retailers can be characterised as being “disjoint”, according to Mars United Commerce’s Katrina Smart.

Your agencies doing the national media… don’t know what is happening at a retailer level.

“Your shopper team will liaise with the retail media network on some of the installed point-of-sale etc., the digital team will work with them to some degree. But then your brand teams are so far removed from that retailer… and then you’ve got your agencies doing the national media, which don’t know what is happening at a retailer level,” says Smart.

illustration of reorg, shutterstock 2419511603

Retail media demands changes to the planning cycle

The focus on the planning cycle is crucial for FMCGs, especially at peak times such as Christmas, where fulfilment, media and customer experience must be in sync.

Michael Drew, Senior Director, Digital Commerce, at Coca-Cola ASEAN and South Pacific, spoke about the company’s omnichannel approach to retail media at the Sydney Programmatic Summit in March last year.

“A component of that approach means we can only work as fast as their slowest execution,” he said, as reported by Mi3.

“Talking to the Coles team last week in Melbourne, we found out that a thousand case stackers [the cardboard units seen in aisles or near point of sale] can take up to 20 weeks to execute – plus the planning cycle,” said Drew.

He also explained that in-store space was “pretty much locked-in” for the following Christmas, before brand plans were in place, with brand, creative and media buying teams “not getting any of that content right until the precipice point.”

This year in particular, we’re seeing a lot of bigger FMCG brands looking at how they can restructure… now that the retail media proposition has changed.

The move to upper-funnel retail media also emphasises the need for collaboration, contends Katrina Smart, with retailer data used across more awareness activity and partnerships with CTV.

“I think that this year in particular, we’re seeing a lot of bigger FMCG brands looking at how they can restructure to be able to manage their retail, media and commerce media more effectively now that the retail media proposition has changed.”

Smart goes as far as to say there’s potentially “a power play” in some businesses, given the shift of retail media into the domain of the brand marketing team.

Retail media agencies like Mars United Commerce work with above-the-line agencies, “to make sure that there’s no duplication in audiences… [and] to make sure that we’re aligned in terms of the timings of the plan.”

A mindset shift beyond demographics to deterministic data

There’s also a mindset shift required in some quarters, to get to grips with new ways of defining audiences, as explained by Nicole Kivel, Northern Europe Managing Director at Criteo.

“I speak to clients at agencies and advertisers. And, you know, when we think about some of our retailer first-party data – we don’t share demographic data, we’re not going to say, ‘hey, this is a female shopper’ (for example). What we can tell you is, this is a shopper who buys nappies every single week, and it doesn’t matter [what their demographic is], they clearly have a child.”

So, when targeting upper funnel media, advertisers can still effectively be “performance-based,” says Kivel. Buyers can move from demographic modelling and focus groups, to looking at who is actually buying competitor products, for example.

More retailers are building out their data infrastructure, so there’s now really valuable deterministic data available.

On using deterministic data, Kivel says there’s still an “inertia to change and start thinking differently, and I think we’re still on… that journey, to get things moving in the right direction.”

Part of this change involves retailers becoming more flexible with their data, and many are decoupling it altogether, effectively being a data provider to some advertisers, who can then activate this against other inventory without necessarily pointing back to the retailer site. Annika Geiger, retail media expert at sell-side platform Magnite told Econsultancy, “More retailers are building out their data infrastructure, so there’s now really valuable deterministic data available… because they’re creating these environments and loyalty programs, [with] more shopper data than they had before.”

Of course, one driver for this data decoupling, as well as the fact that not all retailers can offer a sophisticated and scaled offering on-site, is the ongoing deprecation of third-party cookies, traditionally used to target advertising on the open web. When eventually there’s no third-party data any more, Geiger predicts this is when retail and commerce partners “are really going to come out on top.”

illustration of online search in retail, shutterstock 2038069262

Avoiding the ‘ROAS trap’: new approaches to measurement

The limitations of return on ad spend (ROAS) as a metric are well known in the retail media industry, so much so that Criteo recently published a report titled The ROAS Trap.

Nicole Kivel explains how “a really high return on ad spend” became “the driving force” behind the growth of retail media, but that “it really doesn’t tell the full story.”

“Is it of an incremental nature? …Brands want to be connecting with someone new to them, they want to speak to someone they’ve never spoken to before, particularly on the FMCG side,” she adds.

Brands want to be connecting with someone new to them…

The point here is that ROAS in retail media is always going to be highest when ads are shown to your most loyal and frequent buyers, who may have purchased anyway. Kivel says that Criteo wants brands to be clear on what they want to achieve.

“We’ve done some studies where we can see that, in Europe (for example), there’s a 160% increase in sales per user when [a brand is] activating on-site retail media ads. There’s an increase in conversion rate. So, these are the types of metrics that are really compelling versus just the standalone ROAS [where] you can lose site of the bigger picture,” says Kivel.

Consequently, according to Kivel, brands are looking at a range of metrics, including incrementality, share of digital shelf and share of voice, rather than focusing solely on top line performance. And for categories such as consumer electronics, more sophisticated brands are asking how they connect upper funnel activity with sponsored product ads.

Advertisers need an appetite for ‘test and learn’

The process of advertiser teams and their agencies “connecting all of these different dots” is ongoing, says Kivel, who describes the potential for confusion between the remits of brand teams used to buying programmatic on the open web and retailer teams focusing on moving the needle in stores or retail websites.

Mars United Commerce’s Katrina Smart also highlights these specific skills gaps within FMCG organisations that are not yet aligned at a team level. Off-site expertise may sit with an above-the-line agency, shopper teams are focused on point of sale, the digital team have a “tight digital skill set, usually self-serve (retail media).”

However, Kivel reasons, “There’s one shopper [you’ve] been trying to reach, and that’s the point of advertising. And now we have the ability to understand how our cumulative efforts has a net impact on them.”

It’s the brands “that test quickly, learn quickly, and then [use the results to] inform their strategy” who are succeeding, says Kivel. “Digitally savvy” brands, thinking about the “full funnel dynamic” are best placed to take advantage of these new targeting opportunities.

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